1990 (11) TMI 1 - SC - Wealth-tax

Assessee got compensation of acquisition of his asset - includibility of compensation in net wealth - present value of the future compensation will, have to be determined on a consideration of all relevant aspects that may be put forward before the Tribunal - assessee s right to receive compensation estimated in accordance with proper principles can be included in the net wealth of the assessee

Summary

Issues Involved:
1. Whether the compensation receivable from the State Government under the West Bengal Estates Acquisition Act, 1953, constitutes an "asset" under the Wealth-tax Act, 1957.
2. Whether the sums estimated by the Wealth-tax Officer as compensation can be included in the net wealth of the assessee on the relevant valuation dates.

Issue-wise Detailed Analysis:

1. Compensation as an "Asset" under the Wealth-tax Act:
The primary issue was whether the compensation receivable by the assessee under the West Bengal Estates Acquisition Act, 1953, could be considered an "asset" for wealth-tax purposes. The Wealth-tax Officer had included estimated compensation amounts in the assessee's net wealth for the assessment years 1957-58, 1958-59, and 1959-60. The Tribunal, following an earlier decision, excluded these amounts, concluding that the assessee had no right to receive compensation on the valuation dates. The High Court upheld the Tribunal's decision, relying on its previous ruling in CWT v. U. C. Mahatab, distinguishing it from the Supreme Court's decision in Pandit Lakshmi Kant Jha v. CWT, which dealt with the Bihar Act. The Supreme Court in the present case found that the right to receive compensation is a valuable asset under the Wealth-tax Act, similar to the ruling in Pandit Lakshmi Kant Jha's case, and rejected the High Court's distinction between the Bihar and West Bengal Acts.

2. Inclusion of Estimated Compensation in Net Wealth:
The second issue was whether the specific amounts estimated by the Wealth-tax Officer could be included in the net wealth of the assessee. The Tribunal and the High Court did not address this due to their conclusion that there was no "asset" to include. The Supreme Court clarified that while the right to receive compensation is an asset, its valuation must reflect the present value of future compensation, not the total future compensation amount. The Supreme Court noted that the Wealth-tax Officer had failed to discount the future compensation to its present value, as was done in Pandit Lakshmi Kant Jha's case. The Supreme Court remanded the matter to the Tribunal to determine the present value of the compensation on the relevant valuation dates, considering all relevant aspects and allowing both parties to present their contentions.

Conclusion:
The Supreme Court allowed the appeals, set aside the High Court's order, and held that the value of the right to receive compensation should be included in the assessee's net wealth. However, the specific amounts estimated by the Wealth-tax Officer were not to be included directly; instead, the present value of the future compensation should be calculated. The Tribunal was directed to reassess the compensation's present value, taking into account proper valuation principles and providing an opportunity for both parties to present their arguments. The appeals were disposed of with no order as to costs.